Whether to lock in your mortgage or take your chances with a variable-rate depends on many factors, many of which have nothing to do with interest rates.

The largest obstacle to overcome on the road to homeownership is, in most cases, financing, starting with saving for the downpayment.

A new report from Sotheby’s International Realty Canada, in partnership with the Mustel Group, and the second in the series of the Modern Family Home Ownership Trends Reports*, called (ital) Financing the Canadian Dream (ital) sheds light on the degree to which urban Canadian families are challenged with the choice between buying a home versus saving for retirement and provides additional insight into the considerable role that financial gifts, living inheritances and inheritances are playing in home buying.

The largest financial barrier to saving for homeownership is the cost of covering basic living expenses, such as rent, groceries and utilities, says the report.

“This factor surpassed the significance of other financial obstacles, such as paying for non-essential lifestyle expenses, paying off debt or student loans, and other obligations. Overall, 33 percent of modern family homeowners reported this as their primary obstacle. Rates exceed this average in Calgary (38 percent), Vancouver (37 percent) and Toronto (35 percent). One-quarter of families in Montreal reported basic costs of living as their greatest challenge, significantly below the national average.”

While many families travelling the road to ownership are minimizing or reducing non-essential lifestyle spending to save for a downpayment, the report says many are putting off financing their futures.

“Even as 20 percent of modern family homeowners postponed retirement savings in order to achieve homeownership, another 31 percent of this cohort withdrew funds from their RRSPs for their downpayment,” says the report. “Under the federal government’s Home Buyers’ Plan, first-time home buyers may withdraw $25,000 of RRSP savings ($50,000 for a couple) to finance the downpayment on a home without tax penalty if the amount is repaid within 15 years.”

Other measures taken include securing a better paying job (19 percent), adding a part-time or freelance job to a full-time position (14 percent), delaying the decision to have a child (12 percent) and moving back home with parents or other family members (nine percent).

Saving strategies varied in the four markets surveyed.

“While limiting or eliminating dining out, travel and personal expenditures are the top three home purchase savings strategies for young families across all metropolitan areas surveyed, they are most frequently employed in Calgary, at rates of 54 percent, 51 percent and 47 percent respectively,” says the report. “Modern family homeowners in Calgary are the most likely to have delayed saving for retirement in order to attain homeownership, with 23 percent reporting the use of this strategy. Along with those in Vancouver, families in Calgary are also more likely to secure a job with a higher salary to save for a home, with 21 percent citing this as a strategy. They are among the least likely to move back in with family in order to save for their downpayment, at a rate of five percent.”

Of the respondents, 52 percent who purchased real estate in any of the four markets relied on a financial gift, living inheritance or traditional inheritance as part of the downpayment, with the balance buying their homes without any such assistance.

The report says modern families take on the challenges in the belief their homes will either outperform or match the performance of their financial investments in the coming years, including those in Calgary.

“In spite of significant challenges confronting the Calgary real estate market, including economic headwinds, a pullback in heavy oil prices and rising mortgage rates that have disproportionately impacted home buyers in a recovering economy, real estate confidence levels are resilient amongst the region’s young families,” says the report. “Sixty-four percent of families who own real estate maintain that their homes will outperform or match their financial investments in the next five years, with 31 percent believing that real estate will surpass other financial investments.”

*The report series is based on findings from a survey of 1,743 families in Canada’s four largest Census Metropolitan Areas (CMAs): Vancouver, Calgary, Toronto and Montreal, using a disproportionate sampling method to enable analysis within each metropolitan area, as well as across the combined CMAs. The sample was weighted to match Statistics Canada census data on the basis of age, household income and home ownership within each CMA and to bring the total sample into proper proportion based on relative populations. More than half of households surveyed (57 percent) are couples with one or more children, 35 percent are couples without children, and eight percent are single parents. The age of the oldest adult in each household is between 20 and 40 years for 53 percent of the families surveyed; the oldest adult of 37 percent of the families surveyed is 40 to 44 years, and 45 to 49 years in nine percent of the families. The large majority (84 percent) of households with children under 18 years of age have one or two children. Less than 13 percent have three children or more, and fewer than three percent have children older than 18 years of age residing in the household. The gender of respondents was fairly evenly split at 54 percent male and 46 percent female.

Data for this report series was gathered from August 9 to September 6, 2018

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